Marfrig Global Foods S.A. (MBRFY) Earnings Call Transcript

Good morning, ladies and gentlemen. Welcome to MBRF's earnings call to discuss the results for the third quarter of 2025. This conference is being recorded, and a replay will be made available on the company's website at ri.mbrf.com. The presentation is also available for download. [Operator Instructions] Before we proceed, I would like to remind everyone that any forward-looking statements made during this conference call are based on the beliefs and assumptions of MBRF's management as well as on information currently available to the company. Such statements are subject to risks and uncertainties as they refer to future events, and therefore, depend on circumstances that may or may not occur. Investors, analysts and members of the press should take into consideration the factors related to the macroeconomic environment, the industry and other operational conditions may cause actual effects to differ materially from those expressed in such forward-looking statements. Joining us on today's conference call are Mr. Miguel Gularte CEO; Mr. Tim Klein, CEO of North America Operations; Mr. Jose Ignacio Scoseria, CFO; and Mr. Fabio Mariano, Vice President of the Halal Market and Future CEO of Sadia Halal. I would like to turn the call over to Mr. Miguel, who will begin the presentation. Please, Mr. Miguel, you may proceed.

Good morning. It is with great pleasure that we welcome you to MBRF's earnings call for the third quarter of 2025 results. This is our first earnings presentation since the creation of MBRF. The figures reflect the consistency in executing our strategy focused on high performance and value creation. In the third quarter, we achieved an important milestone. We recorded the highest volume since 2022 and the highest consolidated EBITDA of 2025, BRL 3.5 billion with a net income of BRL 94 million. In this quarter, we had investments in innovation, operational excellence, social and environmental responsibility and market diversification, especially in the Middle East, where we strengthened our presence through the expansion of the partnership with HPDC and the creation of Sadia Halal. We remain focused on expanding our active customer base and strengthening an increasingly robust portfolio with high value-added products. We continue to uphold our commitment to delivering quality food to consumers around the world, now through a 100% integrated multi-protein platform. Now I would like to invite our CFO, Jose Ignacio Scoseria to present this quarter's results in detail. I will return afterwards for final remarks.

Good morning, everyone. Thank you very much for joining MBRF's conference call. We will now go over the consolidated results for the third quarter of 2025, which cover the following business segments: North America Beef, South America Beef and BRF. I would like to highlight that in Q3 2025, we generated BRL 41.8 billion in consolidated net revenue, a 9.2% increase compared to the same period in 2024. Consolidated adjusted EBITDA totaled BRL 3.5 billion with a consolidated margin of 8.4%. Operating cash flow reached BRL 3.3 billion. Net income came at BRL 94 million. Finally, we closed the quarter with leverage at 3.09x the EBITDA of the last 12 months. On the next slide, on the left, we show the year-over-year evolution of total and segment volumes. We recorded a 3.7% increase in volume compared to the same period in 2024, driven by the South America beef and BRF operations. On the total net revenue generated in Q3 2025, we reached BRL 41.8 billion. North America beef accounted for 47% BRF, 39% and South America, 14%. In in this third quarter, adjusted EBITDA was BRL 3.5 billion with a margin of 8.4%. BRF accounted for 71%, South America, 18%; and North America, 11%. Currency-wise, 73% of our consolidated revenue was generated in dollars, 25% in BRL. On this quarter's BRL 41.8 billion in revenue, 75% came from international operations. 40% of the sales volume came from processed value-added products. This reinforces the company's geographic diversification and multi-protein portfolio. We will now present the performance by business segment. I'll turn it over to Tim Klein that will talk about the results of the North American operation.

Thank you, Ignacio. Let's begin on Slide 6, where I will comment on the results for the third quarter. Starting on the first chart on the left, sales volume was 6.3% lower than the same period of the previous year. Industry slaughter volume was down 8% as a result of reduced cattle placements and extended feeding periods. Record cattle prices relative to feed cost of gain, coupled with high replacement cattle prices incentivized cattle feeders to feed cattle longer. As a result, live weights have increased significantly. Net sales were BRL 3.6 billion, an increase of 12.2% versus last year. EBITDA was BRL 74.1 million, 6.4% lower than last year with an EBITDA margin of 2%. Beef demand in the quarter continued strong in spite of record prices at retail. Although box beef prices have increased, it's not enough to offset sharply higher cattle prices. Now I'll move to Slide 7, where I will talk about U.S. market data. Starting on the left, USDA reported Kansas live cattle prices averaged $235.60 per hundredweight, up 26.7% versus last year. The USDA comprehensive cutout averaged $386.30 per hundredweight, up 23.1%, while the USDA reported drop credit increased 2.7% to an average of $11.76 per hundredweight. The USDA cutout ratio was 1.64 versus 1.69 last year. As expected, the cyclical decline in cattle supplies exacerbated by drought conditions the last several years has resulted in record prices and reduced capacity utilization across the industry. We continue to be encouraged by strong beef demand and expect this to continue as we move through this part of the cycle. Now I'll pass to Ignacio.

Thank you, Tim. Let's now move on to Slide #8, where we'll see third quarter performance of our South America operations, including the assets in Uruguay. Starting with the chart on the left, we reached 291,000 tons in this quarter, 17.6% higher than the same period last year. This growth results from the increased capacity implemented by the company over the past few years. Moving to the chart in the middle. Net revenue reached BRL 5.7 billion, 18% higher than in the third quarter of 2024. In the chart on the right, we see adjusted EBITDA totaling BRL 628 million, a 31.8% increase over the third quarter of 2024. This performance can be explained by the combination of capacity expansion, higher plant utilization and efficiency and a greater share of value-added products. As a result, we reached an EBITDA margin of 11.1%, an increase of 120 basis points compared to the same period in 2024. Moving on to the next slide, I will discuss the evolution of volumes in the region and the export dynamics. We delivered strong volume growth in South America with a 40% increase compared to the first quarter of 2024. In this quarter, exports accounted for 39.9% of total revenue in the region. Asia accounts for 56% of South America beef exports. We've been focusing on expanding our sales channels to new markets. In this context, sales to Europe grew by 4 percentage points rising from 15% in Q2 2024 to 19% in the current quarter. Exports from South America to the United States accounted for 14% of total export revenue in the period. On Slide 10, we see the results of BRF operations, which in this quarter reached the highest volume in its history, up 5% year-over-year. In the domestic market, we observed steady volume growth, particularly in the processed food category. The company's geographic diversification helped to mitigate the effects of the avian flu restrictions that temporarily limited poultry exports during the quarter. Net revenue reached BRL 16.3 billion, a 5.4% increase compared to the third quarter 2024. we reported BRL 2.4 billion in EBITDA with a healthy margin of 15.5%. On the next slide, on the left-hand side, we highlight the progress in commercial execution and the expansion of our client base, which now reaches 340,000 points of sale. Both [indiscernible] contributed to a record sales volume in Brazil. Logistics service levels remained strong despite higher volumes. Over the past 2 years, we delivered an 18% increase in processed food volumes in the domestic market. On the right-hand side, we now present the international market highlights. Expansion of the joint venture with HPDC a subsidiary of Saudi Arabia's sovereign fund and the creation of Sadia Halal, a multi-protein leader in the Halal market. This initiative strengthens the strategic partnership, unlocking value in a market that is characterized by rising protein consumption and abundant capital. We obtained 16 new export licenses during the period, 214 new authorizations since 2022, allowing us to mitigate the impact of temporary poultry export restrictions. We increased beef shipments to China. In October, we completed the acquisition of Gelprime, which will contribute to a higher share of value-added products in our portfolio and expanded profitability. Regarding our brands, we continue to advance in different markets where we operate. In Brazil, we highlight the strong performance of the processed food category, which recorded sales growth and market share gains. We maintained market leadership in the GCC with the Sadia brand and in Turkey with the Banvit brand. In the Southern cone, we emphasized the strength and leadership of our brands, Sadia in branded products in Chile and Paty in burgers in Argentina. On Slide 14, we summarize our key sustainability highlights. We achieved 100% satellite monitoring of direct cattle and grain suppliers. Among indirect cattle suppliers, we reached 91.4% monitoring coverage in the Amazon region and 88.4% in the Cerrado region. We're now included in the ISE portfolio, and we were awarded with the gold seal in the Brazilian GHG Protocol program, recognizing our transparency in disclosing greenhouse gas emissions inventories. We joined the Brazil -- without Waste program, an initiative to reduce food loss and waste. On Slide 16, we present our capital structure and cash flow performance. In Q3 2025, consolidated operating cash flow was positive at BRL 3.3 billion. CapEx investments totaled BRL 1.4 billion, and financial expenses amounted to BRL 1.36 billion. As a result, recurring free cash flow for the quarter was positive at BRL 555 million. The next slide shows consolidated net debt for the period. We reported net debt of BRL 41.3 billion at the end of Q3 2025, a 10% increase compared to Q2 2025, primarily due to share buybacks, dividend payments and withdrawals related to the merger process. Excluding these effects, net debt would have been 2.2% lower compared to Q2 2025. Leverage ratio stood at 3.09x. Next, we share details on synergies mapped from the business combination and merge. Synergy levers were thoroughly studied after 3 years of joint work between the Marfrig and BRF teams. The cultural and management alignment provides a clear understanding of opportunities and reduces execution risks. The synergies we mapped were grouped into 4 main areas totaling BRL 1 billion with approximately BRL 600 million expected to be captured in 2026 and the remainder between 2027 and '28. Out of the total amount, 60% will impact gross profit, while 40% will impact SG&A. In corporate structure optimization, we estimate BRL 230 million in synergies fully captured next year. In supply initiatives, we mapped synergies from supply chain efficiencies and value engineering projects totaling BRL 407 million. In commercial and logistics, we expect to achieve BRL 230 million by 2028 through cross-selling, distribution channel optimization in Brazil and abroad and integrated logistics operations in our distribution centers. Additionally, we have several systems and management platform integration initiatives, primarily impacting SG&A. Finally, regarding tax optimization, our estimate remains valid. We are prepared and enthusiastic to move forward in capturing synergies and creating greater value for all MBRF shareholders. Thank you. And I'll hand the floor back to our CEO, Miguel Gularte, for his closing remarks.

Thank you, Ignacio. To wrap up our presentation, I would like to emphasize that we remain firmly committed to our sustainable growth journey with a strong focus on value creation. During this quarter, the company distributed BRL 3.8 billion in dividends, reaffirming our commitment to delivering consistent value to our shareholders. In North America, results were driven by production rationalization and growing demand for beef protein. In South America, we significantly expanded volumes thanks to recent investments in our industry. At BRF, we achieved the highest volume in the company's history with a strong growth in processed products. Furthermore, our market diversification strategy was crucial in sustaining volume growth, even amid export restrictions on poultry. This allowed us to mitigate risks and capture opportunities in high-demand regions, reinforcing our operational resilience. At BRF, our efficiency program continues to deliver solid results, generating BRL 355 million in the period. We also launched the implementation of MBRF+, expanding this methodology across the entire organization, and we began capturing the first synergies resulting from the merger. We furthermore strengthened our presence in the Middle East through the expansion of our joint venture and the launch of Sadia Halal, the world's largest Halal chicken company. We continue to move forward with consistency and determination, supported by the trust and the strategic guidance of our Chairman and controlling shareholder, Marcos Molina. We thank our shareholders and the Board of Directors for their continued support. our customers, integrated producers, suppliers and the communities where we operate. And above all, we express our deep gratitude to MBRF's 130,000 employees worldwide, whose dedication made all these achievements possible. Thank you so much. We'll now begin the Q&A session for investors and analysts. [Operator Instructions].

[Operator Instructions] First question is from Henrique Brustolin, Bradesco BBI.

I have two points I wanted to explore for BRF. Number one, we saw that the EBITDA margin is at 90 points. That was a decrease this quarter, but we realized there was a problem with avian flu. That's why you might have seen this decrease. Can you please elaborate on that? What were the effects of the avian flu to your results? So maybe nonrecurring results in this quarter. And also, I would like to ask about profitability in your operations. And the ones that do not see such an impact, for example, processed food in the domestic market. Can you please break that down. What was the effect of this flu and what we can expect moving forward? So on that note, prices for the domestic market, there was a 3% decrease quarter-over-quarter. Does that have to do with the in natura or should we also look at processed food?

With regards to profitability at BRF this quarter, there are two main points. On the one hand, like we said during the presentation, we're still on this journey to add more value to the company. We reached an all-time high in processed food volume this quarter, growing 7% year-over-year and 5% quarter-over-quarter. If we consider this profitability scenario, the scenario was quite healthy in some key categories. So for processed food, this is something the company has been building over the past quarters. This was the main highlight. Results have been quite robust in the third quarter. Like you said, there was a decrease to the average prices in Brazil. Primarily be explained by the prices of fresh protein, especially broilers. So there was a price reduction because of the product mix exported to China that was redirected to the domestic market, especially wings and boning legs. So the average price decreased. And of course, there was an impact to fresh meat average prices in the domestic market, but we now believe this situation can be reversed. Regarding the impact in China, the market is quite dynamic. Now we just have to see how things will go for the medium term. But what I can tell you is that if we think of direct impact before the closing of the Chinese market, we were exporting more than 7,000 tons of chicken to China a month, and the price gap compared to alternative markets was $2,000 a ton average. And this accounts for direct effects only. If we think of all the impact of the avian flu and the impact to the market, and all things were redirected. There was a change to the flow and pricing in the market as well as direct impacts. And I will not be quantifying that right here. But of course, there was an impact to our profitability this quarter. Still, we're seeing amazing performance for processed food. EBITDA was flat as compared to the previous quarter. Let me just add to Jose Ignacio's answer, Henrique, it's interesting to see the chart on Page 5 of our presentation. You see how diversified the company's portfolio is, 40% processed food. That is important to highlight. On May 15, when we were communicated about avian flu, we immediately at BRF, we took a stance and we used the Sadia brand and the Perdigão brand. We positioned ourselves properly in the domestic market. Since we were fast enough and we have strong brands, there was no impact to the domestic market, but it's also important to say that over the past 2 years, we worked hard for new permits. We have almost 200 new permits that were given over the past 2 years. If you look at September Sussex data, you can see that at the MENA region in the past 2 years, these markets were -- had figures that were above the Asian market, China included before the avian flu event. So I think we did really well. There was a great opportunity to diversify our markets. We're now reaping the benefits of having made the right investments. And in our portfolio, we now have this 40%, which makes us way more resilient as compared to what happened with this sanitary event.

Our next question, Thiago from BTG.

I wanted to go back to a question on prices in the domestic market for the BRF segment. Based on Ignacio answer, it's relatively clear that you see that this drop is driven by fresh products. But I would like to hear, if you can tell us order of magnitude, the evolution of process food prices this quarter, where you gained market share, we saw volume increases, but I would like to see the dynamics of average prices. And do you see there is an impact on product mix? That's my question number one. Question number two, when we look your inventories, there was a significant increase in your inventory account of raw material. When we break that down by Marfrig or BRF. BRF is very relevant. It seems that you built relevant inventory of grains, I imagine for the next period. So could you comment on how much production do you have stored today or grain wise in BRF for how many months or for how many quarters do you have enough grain inventory? Those are my questions.

As for price dynamics in processed foods, what we saw over the quarter was basically maintained solid market, some key categories have more consumption, mainly cold cuts and spreads. As for the price dynamics, if you see the evolution in the quarter, it was flat overall, but within that category, we had greater growth of part of our portfolio that has a lower average price. So there is a mix impact in cold cuts and spreads we grew more. So indirectly if the price was flat, but we grew more in products with lower price. So the market was healthy. Then we are evolving as we were in the first half of the year. As for working capital, you touched on the main points for the quarter. We had increased inventory of about BRL 1.5 billion, almost everything at BRF -- that increase was in line with the season. We grew more than BRL 1 billion in grains. We enjoyed market opportunities in terms of grain supply with the second crop of corn. And we had record procurement of grains in the summer. That makes us comfortable as to how that grain is consumed as a reference, you can take our history since last year, which is a good proxy in order to model that. So this year, we bought a little above average. We made the most of opportunities, but you can use our historical procurement within inventory, there is a seasonal component, as you saw, about BRL 300 million that was realized in Q4.

Net question by Leonardo Alencar from XP.

Congratulations on your results. Now still on BRF, can we focus on Turkey a bit? This region has been letting us down over the past quarters, but we see that there was an interesting change considering your product mix. Can you please give us some more details profitability-wise as compared to history data? Are we still below the potential we can achieve? There was a great increase in growth in processed food because we're unlocking plant capacity. And I believe that with the investments that are being made, we've got more room to unlock this process line -- processed food line and the oversupply context is worse for fresh food than processed food. Can you please talk about Turkey a bit more? Thank you for giving us details on the synergies between the 2 companies. But -- when we think of the short term, moving towards 2026, is there any seasonality effect we should expect quarter-over-quarter? Are we going to follow up on the synergies every quarter? What about SG&A? It seems that the third quarter saw a decrease considering revenue percentage despite strong growth in South America and BRF's volume. There was a decrease in national volume, but should we still expect to capture more value and efficiencies out of these synergies moving towards 2026?

Good morning, Leonardo. Good question on Turkey. I'll hand the floor over to our Halal VP who will become the CEO of Sadia Halal. Mr. Fabio is on the call, so he can answer that question. But before talking about synergies, it's important to remember that structural changes made at MBRF were made in late October, early November. Of course, we are still going to see the effects over the next quarters. We have prepared this merge quite assertively. We wanted to do it in as little time as possible. We were -- we spent 3 years preparing the merge so that the companies had the same culture with the same controller. There was a family-based guideline in both companies. So this was mapped already, so much so that when we published the merge, there was a possibility of getting to BRL 805 million increase in synergies, and we're getting as high as BRL 1 billion already. So we're working so as to increase synergies and capturing more value. This has been the characteristic of this management team. If you remember in the past 3 years, we worked on the BRF plus program, BRF plus has always delivered above our expectations. In the past few months, we've been working so as to build what will be MBRF+ 2026 with metrics and KPIs that used to be controlled and adjusted at BRF. And this is going to become the MBRF program, including beef. With that, I'll hand the floor over to Fabio so he can talk about Turkey.

Let's talk about Turkey. It's important to say that 75% of what we sell in the region are fresh products and 25% processed food. For processed products, -- it's part of the company's strategy, just like in any other region to grow in value-added products. This has been happening already. In 2022, we used to sell 50,000 tons a year of processed products. Now in Turkey, we already sell 80,000 tons, a 60% growth in just a few years. And we still have a lot of room to grow in processed products. In the region, we may find the greatest spread for processed food as compared to fresh food. 8 to 10 points is the profitability difference historically speaking. But that will, of course, demand investments. Production capacity nowadays with some layout adjustments can help us produce more processed food and the market does have opportunities. Our market share in Turkey is equivalent to 20% or 25% depending on the category and the Banvit brand is the preferred brand of 40% of customers. So we can improve our portfolio even further, bringing more profitability to the region and reducing volatility in our results. You mentioned it really well. Results are a bit below history data margins because of the increase in production of fresh chicken. And if you compare this number year-to-date, we see a 13% gap, but that should be balanced soon enough. This trend is already ongoing moving forward to next year, but we're going to place our bets in growing value-added products. since this has been happening already since 2022. We believe that's the way forward.

Leonardo, now just following up on that, let me give you some more figures. In the third quarter, we see no impact of the synergies. If you look at the figures, that's a fact. We announced this in October. So these numbers should be reflected on the fourth quarter's numbers. There's a capture that will help us ramp up in 2026 out of the BRL 370 million impact in SG&A, BRL 160 million will be for structure -- and in 2026 and '27, with the optimized streamlined structure, the remainder BRL 200 million, which are basically for supply and others, should capture this even further in 2026, and we believe we'll ramp up even further. And of course, we're going to follow up on this evolution and talk to you about that in the next quarters.

Our next question Gustavo Troyano from Itau BBI.

Actually, I'd like to discuss the poultry cycles that you see in Brazil and then in the U.S., we have seen important price reductions in the U.S. And I'd like to hear from you if you see any increased competition in the international market if the price reduction might put more pressure on exports from the U.S. that might affect your international markets. Do you see that this competition might become important in the future quarters? And I would like to see if the current supply and demand withstand that dynamics. Apparently, we are heading towards a scenario of more of shortage of protein. And still on that topic, I think you worked a lot on licensing plans to export. Looking forward, how does that international competition affect the approval of new plants for exports? What's your outlook to approve new plants for exports in Brazil? Do you see any other opportunities because there are moving parts in the international scenario, how do you see new plant approvals for exports?

As to your first question, how do we see in terms of the poultry market and the poultry cycle, beginning with the U.S. market. As you mentioned, we understand that increased production in the U.S. about 3%. It made us make specific decisions. And there was price drops because of normal seasonality. We do not see any pressure for next year coming from the U.S. The U.S. is likely to grow between 20%, 25% its production. So we don't see supply pressure coming from the U.S. impacting markets where Brazil competes Recently, we saw what the competition said about the poultry cycle for next year. Their vision is in line with that. And in the market, where we compete with them, especially chicken breast in certain regions and leg quarters in others, I think prices are healthy for the next few months. And we don't see any sign that this supply might be impacting our ability to price our production. Overall, for the poultry market, for next year, we already spoke a little about the U.S. Europe is having difficulties because of the avian flu. China is the only country that have higher rates. So we don't see a scenario. Well, growth might be between 2% and 3%, which is enough to reach a balance. So I see a positive demand. As for Brazil, placement data shows a 3% growth, production growth that was minimum. So the increased placement doesn't translate into production increase. We understand that for next year, there shouldn't be major changes. So balanced global supply and demand in Brazil. We will gain relevance because of our platform. So I don't see any scenario where we would have something very different from what we saw this year. Continuing with what José Ignacio said, I see that the approval of new plants will continue. Those were key to face the avian flu and the Newcastle episode in the Southern most state in Brazil, we have a very good outlook in the next few weeks. We expect the announcement of the prelist for Brazil, which would give us an opportunity to once again export to Europe. Irrespective of that, what was said -- as was said before today, we have a company that sells 40% of processed protein. That gives us resilience against any sanitary issue. Comparing 2024 to 2025, I would say that the New Castle episode last year taught us a lot, and it gave us a road map for the future. So much so that the concept of regionalization and municipalization became accepted in different countries. That's why we were able to restore sales to other markets that was faster in the case of the avian flu. Brazilian exports stopped for 30 days. After 30 days, regionalization and even municipalization started happening and markets reopened, showing the excellent stage of biosafety for Brazilian poultry production.

Next question by Lucas Ferreira from JPMorgan.

Miguel, BRF used to have 180,000 tons of processed food a month regarding as high as 220,000 now. Here's my question. For the next 3 to 5 years, when you think of the market share gap for some categories and some markets also considering the investments that are being made, what should be the processed food volume growth considering your mix, innovation and investments? Something that is feasible, something we can expect. How much should the volume grow for the next years? If you can break that down into which categories you're thinking that can absorb this additional volume. Second question was something you touched on already, poultry cycle This is now the main thing investors are afraid of nowadays. Question about Brazil. The company is now very different from what it was in the past. It is more stable, more efficient. So if you think of the poultry cycle in Brazil, the number of breeders is on the rise, we see that placements are on the rise, but we still see many operational bottlenecks. The question is for next year, do you think we'll see relevant growth in poultry supply in the market. Do you think that will be necessarily translated into an increase in slaughter and meat production for this market. Any figures you can share with us? How much can that poultry production increase be in Brazil?

I think I can take that one, and Ignacio can add later. Now a quick correction, when you say 220,000 tons. Here, we include fresh products as well. And yes, the company has been growing. Ignacio can give you the figures of processed food, but we really see this new scenario, BRF has gone through a great process where we increased commercial efficiency, the number of our customer base, competitiveness in our portfolio. We now have an active customer base that is quite efficient. We got great commercial capillarity in Brazil, and we are seeing that people are well employed in the country. Recent data shows, well, this week, there is an income tax exemption that is going to be given to those who make up to BRL 5,000. So early results would say that this would give an extra BRL 30 billion to the economy, out of which BRL 10 billion would be for consumption. Poultry is sold at a competitive price. We've got strong brands that performed really well in the domestic market. And of course, we're keeping an eye on all these opportunities. At first, we looked at CapEx and investments that were made by the company that was done quite transparently in previous years. And we also invested in CapEx to grow in those categories where we saw opportunities. Now as we look at plants performing well at high occupancy rate and great commercial execution. By the way, commercial execution was brilliant for the domestic market, but for all geographies. Despite the avian flu, we still grew our exports without price decrease, that would be acceptable. Now to talk about the domestic market before handing the floor back to Ignacio. I think it's important to remember what he said previously. We do see higher placement at 2.94, 0.3 production. Now when you think of breeder placement, forecasts show between 61 million, 62 million or maybe 63 million, depending on the source we look at. But there was a decrease in hatchability in almost 0.5 percentage points. These numbers should go back to 62 to 64 weeks, which means 10% less as compared to 2024 and '25. Now long story short, we don't see a lack of balance between supply and demand for 2026. We think we are ready in our commercial channels that are performing really well. We're going to tirelessly keep on working and looking for new approvals. I'm sorry if I'm repeating myself, but we believe that the best option is to have many options. So we're going to keep on working on that. I think Brazil is at a good moment, the Ministry of Agriculture has been doing an amazing job opening up new opportunities for Brazilian exports. Some bad situations could have impacted us, such was the case of the avian flu, but the Ministry helped open up new markets quite fast, not only because Brazil is really important in the international exports market, but because the world needs protein, both for beef and poultry and swines. In this market, demand is oversupply. So for a company that has this geographical diversity and a portfolio of 40% of processed food, extreme high-quality products and a robust portfolio helps. Well, that makes us serve these opportunities and at the same time, make the most out of the new opportunities that may come up.

Just to add to what was said before, let me give you some figures in the process food category. We've been growing at BRF in the past 2 years, almost 10% a year. The main driver for growth, they are quite different if you look at Brazil as compared to the Halal market in the Brazil. Cold cut, spreads and frozen food show great increase and growth. In some categories, we're advancing a bit more, but we're going to keep on innovating with our current product mix and creating value for this category. There are no highlights really. We're just investing in the whole portfolio to keep growing. Now considering international growth. Our focus is breaded food mainly and marinated food. We've just opened up a new [ Kisa ] plant with an extra 25,000 tons of marinated and branded products in the region. That was an expansion to an existing plant, and we're building the Jeddah plant where we'll have another 40,000 tons of additional capacity. The main focus here will be branded products, hamburgers. So these are the main factors, the main drivers that are different from Brazil and for the other countries. But our strategy is to add these products to our portfolio and to grow in this segment. I think it's the same strategy, and it's one of the main highlights this quarter. So on that note, talking about the international context, I think it's important to highlight that there are some favorable side effects to the fact that China reopened for BRF. We've just opened the Henan plant now. And as the Chinese market reopened, we can now export raw material from Brazil to China and process this in our own plants, which allows us to foresee ramp-up in our Chinese operations at MBRF at a faster growth as compared to what we expected before.

Next question from Isabella Simonato from Bank of America.

I have a question about capital allocation. Yesterday, you announced in addition to the buyback that was announced in late September, which is quite relevant. If completely completed over BRL 1 billion in shares buyback. And yesterday, we saw BRL 358 billion. If you could give us what was already done since the opening of the program in September? And the rationale of that capital allocation, considering your leverage and the company's capital structure. So you could give us some color to what has already been done and what is yet to be done?

Actually yesterday, we announced that buyback program, the amount we expanded to the maximum possible, not to adjust the previous announcement. The company is still focused on financial discipline in the current interest rate scenario we are focused on our capital structure. We want to remain focused on deleveraging the company. Since the conclusion of the merger, we understand that the share price sort of was disassociated with the performance of the company. And what we did last month was pretty much in that line. We want to have the optionality to generate value to shareholders via buyback. Looking at market dynamics and the fundamentals of the company, we saw that as an opportunity for shareholders, and we want to have that optionality. And I emphasize that word optionality. We continue monitoring cash generation in the company. In the last it was BRL 2.6 million in free cash flow that we will execute as reasonable without jeopardizing the leveraging metrics. That's what I can comment on in terms of strategy and the rationale of what we did.